Q&A: How prepaid payment solutions could help address security concerns

Consumers in the UK are spending more than £600bn a year using credit, debit and other cards. However, according to a recent survey, 9 in 10 consumers still fear for their online security when shopping online.

The findings also show that many internet users have decided against an actual purchase in the past because the payment process asked them to provide data they didn't want to share. To address the needs of their customers, more and more online businesses are introducing alternative payment methods like prepaid vouchers which are not linked to a bank account or credit card.

We spoke to Udo Mueller, CEO of paysafecard, about the security concerns of online customers, alternative payment methods, the implementation process for online businesses, and the need to adapt payment solution to the demands of smartphone users.

Why do you think that online businesses need to offer their customers alternative payment methods?

There’s a huge difference between high-street retailers and online businesses. A new survey conducted by Marketagent among internet users in the UK has led to results that were quite surprising, even for us. For example, 9 in 10 consumers in the UK still fear for their online security when shopping online. Only 11.9 per cent said that they have no concerns at all to use personal data and bank and credit card details on the internet. Among female consumers, this number is even lower (8.3 per cent).

Many of these internet users must be shopping online despite their security concerns, given that online shopping is more popular than ever before?

That’s true. One of the reasons why many consumers are shopping online despite their concerns is that online businesses often don’t give their customers much choice when it comes to payment methods. However, almost 40 per cent of internet users reported that they have previously decided against an actual purchase or online offer because the payment process asked them to provide data they didn't want to share.

The fact that a third of those surveyed abstained from making a purchase because their preferred means of payment hadn’t been offered means that many online shops and service providers are missing out on additional business. UK consumers in particular are interested in solutions and services that offer convenience. They are looking for an easy and fast shopping experience and don´t want to waste their time entering all kind of information.

How can online businesses address the security concerns of their customers?

Most internet users are aware of the risks that come with traditional means of payments such as credit cards, and are therefore often reluctant to give away their card details or personal information online. Simplicity and security remain the main concerns of internet users when it comes to paying online. By offering prepaid solutions that don’t require personal data, bank account information or credit card details, companies can address the security concerns of their customers.

How do prepaid solutions for the Internet work?

Basically like prepaid cards for mobile phones. Rather than having to enter personal information as well as card or bank account details online, customers simply purchase a prepaid voucher in the desired denomination in a local shop before entering the unique PIN of the voucher at the partnering website. That’s it. Anyone can use it, and it’s perfectly safe as there are no links to credit card details or bank accounts. In addition to the security aspects and ease-of-use, the customers stay in control of their spending, which is a major advantage compared to credit cards.

Whilst it is easy for the consumer to use this form of e-money, getting an e-money license to issue a prepaid solution for the Internet in the UK is anything but easy. We have to meet all the regulatory requirements of the British Financial Conduct Authority (FCA), just like any other payment provider.

What are the advantages of prepaid payments for online business and websites?

Prepaid products bring new target groups to online businesses which were previously unattainable via other payment methods. With prepaid payments, businesses can help ensure that they never end up out of pocket. However, a challenge that generally comes with prepaid solutions that are not linked to a bank account or credit card is straight-forward payouts to customers. This new payout functionality enables online businesses to make payouts to their customers in real-time without needing a bank account or credit card.

Despite this new payout service, prepaid solutions are most suitable for virtual goods and online services like internet and telephony services, online games, music and film downloads, and other websites.

Can regular retailers also benefit from such payment methods?

Prepaid vouchers have been designed for online shops and websites. However, by selling prepaid products for the internet, retailers such as supermarkets, newsagents and even petrol stations can reach out to new target groups and get a share of the business that is nowadays being made online. Since more and more consumers turn to online retailers to cover their needs, many bricks-and-mortar retailers struggle to attract new customers. Selling prepaid vouchers doesn’t only help them to attract new customers and to hold on to existing ones, but also increases customer satisfaction as well as revenues, especially when purchases are more than just a voucher.

As more and more consumers use their smartphones to access the Internet, are these payment solutions optimised for mobile devices?

As smartphones are more popular than ever before, it is essential that modern payment solutions are optimised for this huge target group. To meet the demands of end users and partners, businesses should develop state-of-the-art apps which are updated frequently.

To ensure that as many customers as possible can use these services, apps need to be made available for iOS and Android and support multiple languages. Other areas, such as the website, the payment panel, and the balance-check window, should also be optimised for mobile devices.